F&P to reduce focus on Elba brand in NZ

Fisher & Paykel Appliances says the relocation of manufacturing from Australasia to Thailand and Mexico has delivered cost savings. Photo / Glenn Jeffrey

Fisher & Paykel Appliances, which yesterday reported a full-year loss of $83.3 million, has announced it will scale down its low-end Elba brand in New Zealand.

The company spent $158 million on its purchase of Italian stove maker Elba in 2006.

Haier, the Chinese home goods maker that bought a 20 per cent stake in Appliances last year, has plans to increase its presence in the market segment occupied by Elba.

Appliances' spokesman Matt Orr said the scaling down of Elba was only a re-branding process and the products would continue to be manufactured and sold under the F&P name.

An extensive marketing campaign for Haier's products is set to be launched in New Zealand next month.

Appliances, which will sell and market the Chinese firm's products in New Zealand, says it will focus on positioning its own goods in the mid to high end of the local market, avoiding direct competition with Haier.

Stuart Broadhurst, chief executive of Fisher & Paykel Appliances, said market data showed F&P was the preferred brand of consumers.

"We lost some of that preference when we tried to force people into an Elba-branded product.

"We've realised that the best solution is to give customers what they are after and listen to what they want."

Broadhurst said small quantities of Elba-branded products would continue to be sold in "different distribution channels" from the firm's current retail outlets.

Appliances' Exclusive Dealer Arrangement, which historically saw its products sold by a limited number of retailers, expires on July 1.

The company's after-tax loss of $83.3 million was an improvement on the previous year's loss of $95.3 million.

Normalised operating profit before interest and tax was $23.7 million in the second half of the year, compared with $5.7 million in the first.

The company says the improved figures were the result of cost savings gained from its global manufacturing strategy - which saw operations relocated from Australasia to Thailand and Mexico - as well as increased market share in Australia.

The market reacted without surprise to yesterday's result, with Appliances' share price closing unchanged at 55c last night.

Broadhurst said it had been a difficult year for Appliances, but the distraction of ballooning debt levels was now behind the firm.

The company reported a group net debt of $171.1 million, down from its peak of $502 million last year.

Broadhurst said sales agreements had been reached with US appliance retailers Sears and Lowe's.

Appliances was also rapidly expanding its presence in Asian markets, with F&P stores recently opening in China and Vietnam.

Further stores were planned in other Chinese locations as well as the Indian city of Hyderabad.

The New Zealand market remained flat, he said, and sales in Australia had softened. "We saw the Australian market down 6 per cent year-on-year."

Asked about quality and service issues raised by US F&P customers on a prominent American consumer website and highlighted in a recent Herald article, he said: "In that case we were unaware of some of those issues ... we have done a number of things to resolve that."

Broadhurst said Appliances was a small player in the US market, and repairmen in that country had found servicing its products like the DishDrawer complicated, leading to some of the complaints from customers. "We are in the process of rolling out our own service infrastructure to make sure we get a good, reliable service to our [US] customers."

He pointed out that the website that published the complaints of Appliances' customers - consumeraffairs.com - was revenue driven, as its operators collected money from companies in exchange for putting them in contact with disappointed customers.

"Having said that there are issues that customers had with a product and we haven't dealt with them as quickly as we could, but in some cases third parties have been the contact point, rather than Fisher & Paykel."

Appliances had put a lot of effort into increasing the quality of products coming out of its Thai and Mexican plants, Broadhurst added.

"There's certainly a renewed focus on quality within the business."

Craigs Investment Partners senior research analyst Dennis Lee said despite the cost savings gained from Appliances' new global manufacturing strategy, the company still faced many challenges.

"[Appliances] is heading towards a very difficult 12 months," he said.